In today’s world of innovation and advancement, a conducive atmosphere has developed to usher in a rising era of startups. While some of them get to taste sweet success, others fall prey to bitter failure. But in the end, it is all about taking those risks while utilizing resources to keep your startup afloat. The Lean Startup by Eric Ries is the fruition that was ideated after seeing the failure of ideas that could have worked amazingly well.
Principles to Learn From
Ries, in his book, thinks of startups as ‘a human institution designed to create new products and services under conditions of extreme uncertainty.’ And this fascination doesn’t stop here. The book introduces 5 crucial principles about startups and entrepreneurs for the readers to learn from:
- Entrepreneurs exist everywhere.
- Being an entrepreneur is all about management. It may not be like what you might have learned in school, rather it is about the right approach to cater to the needs of your startup.
- Validated learning is imperative. Times are changing and so should learning. Having a scientific learning paradigm can be beneficial to determine what the customers want.
- Build-Measure-Learn is that feedback loop that is quite fundamental to your startup. It not only helps you steer the startup but also helps you get better by learning quickly and avoiding any wastage of money.
- Not to forget, Innovation Accounting is a great tool to keep a track of any kind of progress made by your startup.
Aspects of The Lean Startup
Throughout the read, the author makes it clear for you to know that you need to have goals to keep your startup running. Eric says that what every startup seeks is an insight into their customer’s needs and pockets while making adjustments time-to-time. This lays out the basis of the approach called Validated Learning.
Validate Learning, in turn, makes a Startup Hypothesis, which deals with building a sustainable and secure business according to your vision. This hypothesis comprises two essential components namely the Value Hypothesis, which quantifies the delivery of value to the customer, and the Growth Hypothesis, which determines how well will the organization grow once the product is being used.
Eric lays emphasis on the fact that once the hypothesis of a startup gets going, it is time for you to perform Lean Experimentation. To begin with, tracking the behavior of customers is important instead of asking for their opinions to know their preferences. Next, you should validate your hypothesis with the Minimal Viable Product. Now, all you need to do is to provide information about your product before launch to know what the response is like, which buys you time to make amends if required.
These valuable principles of lean experimentation can give such valuable knowledge to you as an entrepreneur which broadens your perspective to things you couldn’t have even predicted. The main goal is to Build-Measure-Learn as swiftly as possible with the minimum product to get reliable statistics on your hypothesis. This is where the Minimum Viable Product (MVP) comes in the background and Eric enlightens by stressing upon the fact that this product is not aimed to please customers at the first go.
Depending upon the type of your business, the MVP could change. Here are some of the types for you to refer:
- Landing Page MVP involves creating a product page before releasing it to analyze the response of targeted users.
- Video MVP incorporates making a video displaying the use of your product to give a theatrical experience to your customers and allowing them to decide if they want it.
- Concierge MVP runs manual processes to deliver the services you have to offer, which gives customers a quick chance to engage with your product.
- Wizard of Oz MVP is a kind of hidden Concierge MVP where you test an automated technology product with a human behind the scenes.
By educating the reader with all the crucial technicalities of analyzing the customer base before launch, Eric now prepares you to evaluate the outcome of your action plan with a set of metrics. These metrics should be closer to reality and avoid any false optimism. Instead of using the metrics that work on cumulative data, an accurate way to measure the progress of your business is to differentiate the users independently into groups or Cohorts, based on the time of their joining. An instance would be, measuring the weekly signup rate to check growth over time.
The next thing you should worry about after your metrics begin to improve is to know the cause behind that improvement. Is it due to a new feature on the product or just some news article that stirred the traffic for you? Here the author introduces the logical method of A/B Testing for your product to understand what is more preferred by your users.
For example, you can set up a landing page MVP displaying two potential features and a signup form. Set up an A/B Test and display one feature to half users and the second feature to the other half. The number of signups for the particular feature would allow you to see which one is preferred. This method also decreases any kind of team politics and is unbiased.
Pivot
Through many chapters of wisdom and power techniques, a new aspect of Lean Startup called the Pivot is shared. At times, the metrics don’t work the way you had planned and that is when doubt on your approach and Build-Measure-Learn loop creeps in. Now is the time when a pivot meeting comes in handy to keep you on the right track. You would know when it is time to Pibot when you see any of the two signs – your metrics are not meeting your goals, or minimal progress can be seen.
Types of Pivot
The types of pivots required can vary depending upon the need of your customers and the current situation of your startup. Here is a list of the types of pivots for you to understand:-
Zoom-in Pivot
This can be useful when your customers are in awe of one particular feature of your product. It is now time to give them this sole feature.
Zoom-out Pivot
When there are fewer features available, you need to come up with more to attract people.
Customer Segment Pivot
Your product may be the best out there but not for some customers, that is when you can focus on targeting the product on another segment of customers who might appreciate it.
Customer Need Pivot
After you have got the idea of what your customers need, you can modify or bring a new product to keep them going.
Platform Pivot
With this idea, you can change your product from an application to a platform or vice versa.
Business Architecture Pivot
Keeping in mind the B2B or B2C model, you can change the type of business between high margin and low volume, or low margin and high volume.
Value Capture Pivot
You can deploy this when you alter the way you monetize your product for instance from advertisement to subscription model.
Growth Pivot
Change the way you try to bring customers to your product.
Channel Pivot
As the name suggests, it involves changing the way of delivering a product to your customers.
Technology Pivot
Focusing on newer technologies for a better solution for your customers is another type. It enhances performance and can help you get better pricing. For example, Netflix switched from CDs to the Internet.
In Summary
Eric wonderfully elucidates all this information for a business runner via the three sections of his book – Vision, Steer and Accelerate. Through these sections, the author brings home the idea that each product has a life cycle as it goes from ideation to growth and scaling. For an entrepreneur, it is a continuous process of learning and moving to the next stage by bringing innovation. Moreover, the idea of startups is not just limited to small scale companies. A startup can be a large organization creating something under extreme conditions of uncertainty.
In a nutshell, this book lays out how successful startups emerge out of a team coming together to put in hard work and bring successful products to people. It is made clear that entrepreneurs are everywhere, even when one just decides to start with enough resources and management at hand.
